$$\text{Market Demand} = \text{Individual Demand}_1 + \text{Individual Demand}_2 + \ldots + \text{Individual Demand}_n$$

Question 1

Which of the following best describes the law of demand?

Accepted Answer

As the price of a good increases, the quantity demanded decreases.

Question 2

Suppose the price of coffee increases. What is likely to happen to the demand for tea, assuming tea is a substitute for coffee?

Accepted Answer

The demand for tea will increase.

Question 3

Which of the following is an example of a public good?

Accepted Answer

Police protection

Question 4

If the price of printers decreases, what is likely to happen to the demand for ink cartridges, assuming they are complementary goods?

Accepted Answer

The demand for ink cartridges will increase.

Question 5

Which of the following would cause a shift to the right in the demand curve for ice cream?

Accepted Answer

A hot summer season

Question 6

What happens to the equilibrium price and quantity if there is an increase in demand, holding supply constant?

Accepted Answer

Equilibrium price increases, equilibrium quantity increases.

Question 7

If the cost of raw materials increases for chocolate manufacturers, what is the likely effect on the supply curve for chocolate?

Accepted Answer

The supply curve shifts to the left.

Question 8

Which of the following is the correct formula for market demand?

Accepted Answer

$$	ext{Market Demand} = 	ext{Individual Demand}_1 + 	ext{Individual Demand}_2 + \ldots + 	ext{Individual Demand}_n$$

Question 9

A decrease in consumers’ income will most likely cause the demand for which type of good to increase?

Accepted Answer

Inferior goods

Question 10

If the price of ice-cream cones is set at $2.50, and the quantity demanded is 2 while the quantity supplied is 4, what is the market condition?

Accepted Answer

There is a surplus of 2 cones.

Question 11

Which of the following events would cause a movement along the demand curve, rather than a shift of the curve?

Accepted Answer

A change in the price of the good itself

Question 12

Suppose a new technology reduces the cost of producing cars. What is the likely effect on the supply curve for cars?

Accepted Answer

The supply curve shifts to the right.

Question 13

If the price of soybeans rises, what is likely to happen to the supply of corn, assuming a farmer can produce either crop?

Accepted Answer

The supply of corn will decrease.

Question 14

Which of the following best describes equilibrium in a market?

Accepted Answer

It is the price at which quantity supplied equals quantity demanded.

Question 15

If a city’s population increases rapidly, what is the likely effect on the market demand for smartphones?

Accepted Answer

Market demand will increase.

Question 16

Which of the following is a correct step in analyzing changes in market equilibrium?

Accepted Answer

Decide whether the event shifts the supply or demand curve.

Question 17

If the price of ice-cream cones is below the equilibrium price, what will happen in the market?

Accepted Answer

There will be a shortage.

Question 18

Which of the following is an example of a movement along the supply curve?

Accepted Answer

An increase in the price of the good itself

Question 19

If both the demand and supply for a product increase, what happens to the equilibrium quantity?

Accepted Answer

It increases.

Question 20

Which of the following best explains why the demand for low-grade rice decreases as consumer income rises?

Accepted Answer

Low-grade rice is an inferior good.

Understanding Individual Markets: Demand and Supply

Study Guide - Practice Questions